Long-Term Solar Tax Credits Introduced in Congress

As lawmakers in the nation’s Capitol scramble to confront record energy prices, legislation was introduced in Congress this week that could have a lasting impact on the renewable energy market in the U.S. – particularly for solar energy. The “Securing America’s Energy Independence Act,” calls for extending the solar tax credit for eight years and for changing the credit cap from $2000 per system to $2000 per kilowatt. The credit will apply to solar systems and cells.

Last year’s Energy Policy Act of 2005 provided a 30% tax credit for solar systems purchased for both residential and business applications. However, these credits will expire next year without legislative remedy, a term too short to encourage significant industry growth say many experts and industry representatives. A long-term extension, they say, is essential to reducing the cost of solar energy, as it would create market conditions that allow solar companies to make investments and drive down costs through economies of scale. Though the bill is unlikely to pass through the legislative process without modification, high gasoline prices, environmental concerns, and a growing awareness of the looming worldwide energy crisis have created a political atmosphere in which renewable energy initiatives are attractive to lawmakers, said Rhone Resch, President of the Solar Energy Industries Association (SEIA). An eight-year extension of the original two-year solar credit, which was enacted by the Energy Policy Act of 2005, will have a pervasive effect on the U.S. solar market, said Resch. “An eight-year extension will allow the U.S. to reclaim leadership as the number-one market for photovoltaics, and I think it would allow us to be competitive in solar thermal. It would also, without question, solidify the U.S. as the biggest marketplace for concentrating solar,” said Resch. The bill was introduced in both the House of Representatives and the Senate (H.R. 5206 and S. 2677, respectively). The main sponsors are Senators Gordon Smith (R-Oregon) and Robert Menendez (D-NJ), as well as Reps. J.D. Hayworth (R-AZ) and Michael McNulty (D-NY). Numerous other lawmakers agreed to co-sponsor the bill, bringing the total support up to nine Senators and 23 Representatives. The House and Senate bills include the following provisions: Residential Solar Tax Credit: Extends a 30-percent tax credit, created in the Energy Policy Act of 2005, for the purchase of residential solar water heating, photovoltaic equipment, and fuel cell property. Changes the maximum credit to $2,000 for each kilowatt of capacity for solar equipment and $1,000 for each kilowatt of capacity for fuel cells. Credits may be taken against the alternative minimum tax. Expires after December 31, 2015. Business Solar Tax Credit and Fuel Cell Tax Credit: Extends a 30-percent business credit, established in the Energy Policy Act of 2005, for the purchase of fuel cell power plants, solar energy property, and fiber-optic property used to illuminate the inside of a structure. Credits may be taken against the alternative minimum tax. Expires after December 31, 2015. Despite a tight federal budget, Congress is under pressure to help fund alternative energy sources for Americans. “This is one of the few tax credits that consumers can utilize to reduce their energy bill. I think as we get mired deeper into the oil crisis and the electricity crisis this summer, there will be a lot of pressure on the Hill to pass legislation that is consumer focused,” said Resch. “This will really help those who are on the fence to decide to install solar on their homes.”
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